Lightning Network Achieves Record Capacity Amid Growing Exchange Adoption

The Bitcoin Layer-2 solution, the Lightning Network, has set a new capacity record, signaling an increase in adoption among major cryptocurrency exchanges. This rise comes alongside significant upgrades aimed at enhancing functionality and efficiency.

Key Takeaways

The Lightning Network (LN) reached its highest capacity ever at 5,606 BTC on December 18, 2023.
Significant contributions to the LN’s capacity have come from large exchanges like Binance and OKX.
The total number of Lightning nodes is currently 14,940, a decrease from its 2022 peak.
Recent upgrades to the Lightning Labs’ Taproot Assets platform will enhance asset transfer capabilities.
Tether has led an $8 million funding round to boost stablecoin payments through the LN.

Lightning Network hits record capacity on crypto exchange adoption

Lightning Network Hits New All-Time Capacity

The Lightning Network (LN), a Layer-2 scaling solution for Bitcoin, has recently achieved an all-time high capacity amid growing adoption from prominent crypto exchanges. According to Bitcoin Visuals, the capacity reached 5,606 BTC, surpassing its earlier record set in March 2023.

Additionally, the analytics platform Amboss recorded a peak capacity of 5,637 BTC, equivalent to roughly $490 million, as of Tuesday. This increase in capacity has been observed over November and December, following a year marked by declines. The addition of more Bitcoin to the network is enabling quicker and less expensive transactions.

Despite this increase, the number of Lightning nodes, which create payment channels funded by Bitcoin, has dropped to 14,940, down from a peak of 20,700 in March 2022. The count of channels among these nodes stands at 48,678, also lower than in 2022. These figures suggest that even though more Bitcoin is being added to the LN, there has not been a corresponding rise in operational activity, indicated by the number of nodes and channels.

Adoption by Companies on the Rise

“It's not isolated to a single company adding more Bitcoin; it's a widespread trend,” explained Amboss. The platform noted that large cryptocurrency exchanges, including Binance and OKX, have been increasing their BTC deposits on the Lightning Network this month, which has contributed to the considerable growth in capacity.

Large crypto exchanges have been adding more BTC to the LN. Source: Amboss

Related: Tether Leads $8M Investment in Lightning-Focused Startup
On Tuesday, stablecoin issuer Tether announced it led an $8 million funding round for Bitcoin startup Speed, aimed at facilitating stablecoin payments on the Lightning Network. Meanwhile, well-known crypto wallet MetaMask introduced Bitcoin support this week, though it clarified that transactions would utilize the Native SegWit derivation path instead of the Lightning Network.

Taproot Assets Receives Significant Upgrade

Lightning Labs announced on Wednesday the launch of an upgrade for Taproot Assets, version 0.7. This update enables features such as reusable addresses, auditable asset supply, and larger, more reliable transactions.

Taproot Assets is a multi-asset Lightning protocol that allows for the minting of assets like stablecoins on Bitcoin, which can then be transferred through the Lightning Network. Currently, stablecoins mostly operate on centralized or less secure networks, but with Taproot Assets, they can benefit from Bitcoin’s robust security while achieving instant, low-cost transactions via the LN. The new auditable supply feature enhances transparency without depending on trust, potentially transforming Bitcoin and the Lightning Network into a multi-asset platform, as suggested by Lightning Labs.

Magazine: Do Kwon Sentenced to 15 Years, Bitcoin’s ‘Choppy Dance’: Hodler’s Digest